What Do Land Developers Look For?

Question

I am wholesaling my first residential zoned parcel of land and as a newbie to land wholesaling, what specifically do land developers look for in the land itself for purchasing it? I've done all the research and due diligence for the land and I want to make the developer is getting a profitable portion for it. Any advice/suggestions helps!

Scott P. · Answer

@Nigel Witherspoon said above in Item#1 with this thought.

In my area not many Builders buy lots right now.  The lots tend to be bought by individuals like you and I.  Those folks then hire a Builder to build on the lot.

Normally the seller of the lot would provide information about utility availability and what easements there are for drainage etc.  I believe you would need all that info to show to any prospective Buyer.

Good luck!

Scott P. · Answer

You're welcome @Nigel Witherspoon.  It's possible I misunderstood your original question.

In my area a "developer" looks for farmland or possibly lots in a city that have a building that would likely be demolished or perhaps used to have a building and are now empty.  A "builder" on the other hand, comes to land or lots that are already "developed" and then builds a house, or an apartment building, or a commercial building, etc.

If you think maybe I misunderstood jut let me know and I'll answer again.

Jay Hinrichs · Answer

when builders are not buying lots that means there is no Spec market.. only build to suit ..  out our way we pay 30 to 70k in the form of system development charges  then you have to pay to run the services.. LOL.. we cant get going vertical for less than 100k a lot bare minimum. usually closer to 150 to 200k.. that's why we have no affordable housing in the SFR range.

Don Gouge · Answer

Unless the land is an absolute steal a developer will only buy on option or with the contingency of acquiring all of the necessary zoning and approvals.

Scott P. · Answer

@Nigel Witherspoon Build to Suit sounds correct for my area for a lot in a subdivision that is already developed.  In my area, I would think an individual might buy the lot at retail to hire a Builder to build their own home or a Builder might buy it as 50%-75% off retail in order to build a house on "speculation" hoping to sell the lot with the finished home on it.

I'm not sure how it might work in your area though.

Nigel Witherspoon · Answer

@Scott P. After talking with a few investors in the area, they look closer to 75% off for infills to even profit from the build. So it works the same as well.

Nigel Witherspoon · Answer

This infill is located in a developed subdivsion. So a build to suit is primarily more of what the buyer would get out of it? Since the subdivision is already developed.

Nigel Witherspoon · Answer

@Scott P. After doing more extensive research like you mentioned, the fees to build in the area where its at are low, including sewer, natural gas, zoning, permits, etc.  Another concern I have is the price for the lot. If the comp value of the surrounding land is $2K under what the seller is asking, will this not appeal to builders?

Nigel Witherspoon · Answer

@Scott P. Thank you for that. I’m currently searching for builders since the last comment!

Nigel Witherspoon · Answer

@Jay Hinrichs if the lot sits in a well-developed neighborhood and has already been cleared for building and zoning, wouldn't this make the lot valuable to a land developer?

What I am going off of is everything the client told me and doing my due diligence into researching the land itself. Also, should I have an appraiser come take a look at the land since the last appraisal was done in 2017?

The comparable homes around it are increasing at about 2%/year.

What Do Land Developers Look For?

Most Popular Reply